United States of Insurance
United States of Insurance
April 12, 2010
Today we will consider a model for replacing our current form of government with an insurance-based model.
In step one of this hypothetical future, the government of the United States buys every insurance company in the country at estimated current values. In this imagined future, the government becomes the insurance provider for the country, and perhaps the rest of the world. The profits from selling insurance will eventually replace taxes. Our government would become a for-profit enterprise.
In a way, the U.S. is already sort of a big insurance company. When something catastrophic happens, from hurricanes to war, the government steps in. I’m suggesting we formalize the arrangement and try to monetize it, with most of our profits coming from international sales.
Remember that an insurance company does more than just collect premiums and pay out for losses. They also work to reduce risks. This is similar to what a government tries to do for its people. Governments urge you to quit smoking, and they force you to wear seatbelts. Governments form armies to keep the homeland safe. Governments fund schools to keep future generations from needing aid. For all practical purposes, the government is already a big insurance company. All I’m suggesting is that we become more efficient at it, and make some money in the process.
Think how much the rest of the world would pay for our military protective services. It has to be a lot more expensive for a country to have its own military than it would be to pay for insurance against unlikely attacks. Obviously some countries would keep their own armies out of pride, or fear, or tactical preference. But I can imagine a few hundred smaller countries preferring to pay insurance for military and diplomatic protection.
The U.S. probably has the best disaster emergency resources in the world. We should be selling those services in the form of insurance policies. If the tsunami hits, we swoop in and rebuild towns and provide emergency services up to some predetermined limit. Perhaps we would still help the uninsured, just to be good neighbors, but at a lower level, and funded only by donations.
The thing I find interesting about insurance as a new model for the government is that it would lead to practical laws, especially if law makers had some sort of profit motive. For example, you might see the legalization of any activity that lowered financial risks. I think you’d find that in most cases, the majority of citizens coincidentally support just about every policy that saves money in the long run. That’s because the best way to save money in the long run is to keep citizens safe and healthy and prosperous.
Obviously there would be danger in allowing a profit motive for government officials. The press would have to be our watchdogs. Assuming some transparency of decisions, based on published actuarial tables and budgets, there shouldn’t be too many surprises in what choices the government makes.
In this imagined future world, politicians are still elected by the people. And the big moral issues could still be decided based on cultural preferences over profits. The difference is that the voters would always have an estimate at hand to see how much those preferences might cost them. For example, if the majority of citizens prefer to keep doctor-assisted suicide illegal on moral grounds, that’s fine. But citizens would have access to a government-provided estimate on how much that decision costs the economy.
Another benefit of the United States of Insurance is that citizens would have just one policy for all sorts of risks, including automobile, health, home, personal liability, and so on. Your premium costs would depend on your specific situation. Just check all of the appropriate boxes on a web page, and enter your bank account number for automatic deductions. You just paid your taxes and handled all of your insurance needs in ten minutes.
I can imagine that becoming the United States of Insurance would make the world safer in the long run. Imagine two smaller countries spoiling for a fight, and one of them is an insurance client. The plodding and ineffective United Nations would be irrelevant, but the United States of Insurance would step in fast to protect its investment. No one would ever misjudge its intentions because its motives would be entirely transparent.
The insurance model would also remove unproductive emotions from international affairs. Many of our problems in the world seem to revolve around which leaders have bruised egos, who is getting snubbed, and that sort of thing. If the United States of Insurance started making decisions based on actuarial tables, other countries would find it hard to find any negative emotion other than boredom.
The biggest leap of faith in this thought experiment is that the government could do anything right. But consider that 90% of private businesses eventually go belly up. If you could measure the performance of your government the way you measure the performance of private companies – by profits, and the government leaders themselves had a profit motive, how efficient could government become? The United States of Insurance would allow that sort of profit measurement and incentive.
I agree that this imagined future can never happen. We don’t have the sort of government that can change. It’s just interesting to think about.